After the Reserve Bank of New Zealand's decision on Wednesday morning to lower the official cash rate by 50 basis points to 3.75%, the bank issued the minutes of the Monetary Policy Committee meeting, and the key points included in the minutes were as follows:
If economic conditions continue to evolve as expected, the Reserve Bank of New Zealand will have room to further reduce the official cash rate in 2025. Future inflation expectations, companies' pricing intentions, and the degree of spare productive capacity align with achieving the inflation target in the consumer price index sustainably. There are economic risks stemming from rising trade barriers and broader economic fragmentation. Today’s reduction provides the context and confidence for the committee to continue lowering the official cash rate, and more quickly than expected in November. Increased trade restrictions are likely to reduce economic activity in New Zealand. Economic activity indicators, including a range of business surveys, have improved in recent months. While low interest rates are expected to support recovery in the domestic economy, the speed and timing of the recovery remain uncertain. There is significant spare capacity in the New Zealand economy, slightly more than the Reserve Bank of New Zealand estimated in November.
